Thoughts on Relative Costs

Building a house forces a shift in perspective on money and costs. We are dealing with large amounts of money, but it is still valuable to pay attention to the small savings.

The whole project costs a lot (it is much more than we planned to pay for a house just a few years ago). The land purchase alone was more than we had ever spent in an entire year, let alone all at once. The down-payment for the construction loan is as much as the cost of the land, but those together are less than half the total cost. Dealing with numbers this large makes us a bit inured to how much money we are actually spending.

However, we cannot lose sight of the smaller costs that make up the total price. Carefully considering trade-offs, even when it only saves a few hundred dollars, allows us to allocate the budget where it is most valuable without going over our target. For example, saving a few thousand dollars on appliances and eliminating unnecessary features of the kitchen cabinets will allow us to get nicer hardwood and faucets.

Depending on what we're looking at, we change what we consider the minimum worth worrying about. At the level of the project as a whole, we generally consider the costs in increments of $5,000. When looking at our savings account or cost increases, we round to the nearest $5,000. Changing lenders to reduce our financing costs by $2,000 would barely be worth it we only considered financial savings.

But the many facets of the construction budget merit closer attention. We look carefully at increases of as little as $500. That amount is trivial compared to the entire budget, but with 20-30 categories in the budget, these small changes can add up quickly. We don't worry about everything. For anything less than $100, we consider the impact minimal. Even if we added that to every category, the affect in the overall cost will hardly be noticeable.

Whenever we make a change, especially a change that affects cost, we ask ourselves, "Is this upgrade worth it to us? Can we afford it?" By considering those items, we've been able to keep the costs reasonable and choose the upgrades that will really make a difference to us.

We do hope that once this project is complete, our financial sense of scale will return to normal. For now, we barely blink at putting $4,000 on a credit card or writing a check for $10,000 because that is what we have set ourselves up to expect.